How the Autumn Budget 2021 Will Affect Small Businesses

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How the Autumn Budget 2021 Will Affect Small Businesses

The Autumn Budget 2021 is an important day for UK small businesses. Chancellor Rishi Sunak has outlined his proposal on how to support the economy and aid small businesses, that will already be affected by the increases in National Insurance rates and the National Living Wage.

Some may consider the announcements a mixed bag. There is promising news for the retail, leisure, and hospitality sectors, which will see a 50% reduction in business rates for the next year. However, there are also missed opportunities, such as the lack of revolutionary change to the business rates system.

Here are our main takes on the Autumn Budget 2021 and how UK SMEs will be impacted. 

Corporation Tax Increase in 2023

In April 2023, the Corporation Tax rate will rise to 25%.

This will only be applicable to companies that have annual profits greater than £250,000. However, SMEs will want to keep this in mind, when planning for the future.

Business Rates Changes

Sunak has announced that the government will not be abolishing business rates, but instead, they are making the current system fairer.

From 2023, the business rates system will be re-evaluated every three years.

As many expected, a green investment relief will be introduced as a way to encourage small businesses to use green technologies.

Furthermore, there will be a new business rates improvement relief, which will allow businesses to make property improvements, for a year, without paying extra business rates.

Both of these reliefs will start in 2023. Also, the planned increase in the business rates multiplier will be cancelled.

Retail, Leisure & Hospitality Business Rates Cut

The retail, leisure, and hospitality industries were greatly affected by the pandemic, so to help businesses in this sector, there will be a new 5% business rates discount.

This will apply for 12-months, and the maximum discount will be £110,000.

This is presumed to take effect in April 2022.

A Simpler Approach to Alcohol Duty

Sunak has announced an updated system for alcohol duty taxation.

The number of main duty rates will be reduced from 15 to 6, with the main principle being that the stronger drink, the higher the rate of tax.

Some high-strength drinks will attract more tax, than with the current system.

Whilst there will now be less tax on lower strength drinks.

A new small producers relief will also be introduced, which will extend small brewers relief to small producers of other low-strength alcoholic drinks.

The duty on sparkling wines will be cut from 28% to an equivalent level with a still wine of the same strength.

On a similar note, the duty on fruit ciders will be matched to the duty paid on apple and pear ciders.

To aid pubs, a new draught relief will come into effect. This will cut the duty paid on beer and cider from draught containers over 40 litres by 5%.

All these changes will be permanent and start in February 2023.

Finally, the planned increase in duty on spirits, wine, cider, and beer, will no longer take place.

Planned Rise in Fuel Duty Cancelled

The planned rise in fuel duty has been cancelled, which means the tax paid on fuel is going to be frozen for the next five years. This will be welcome news for any small businesses that travel the country, though rising fuel costs may still affect them.

National Living Wage Increase Confirmed

The National Living Wage will rise to £9.50 an hour. For millions of lower-income workers across the country, this will be a relief, although of course there are implications for small businesses in the retail and hospitality industry, as they will need to budget for this increase.

There has been obvious good news for retail, hospitality, and leisure businesses, as the 12-month 50% cut in business rates will make a real difference for the sector.

Many hospitality firms will also benefit from the changes to alcohol duty, whilst the introduction of draught relief will be brilliant for pub owners.

However, some small business owners may be disappointed, as support has only been offered to certain industries and there has been little to reduce the impact of the increases in National Insurance and the National Living Wage rises.

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